Three Reasons Why Online Advertising is the Worst Model for Your Startup

You might have noticed a lot of recent complaints about what’s known as “page view journalism.”

Thanks to the way online advertising works, many online publishers push out tons of daily content, most of it filler. Or it’s overtly controversial — not on its merits — but for the sake of controversy (and page views).

Many attribute this approach to greed. I attribute it to a marginal revenue model.

Online advertising has grown by leaps and bounds since its collapse at the dot-com implosion. And yet it’s still not the best way to monetize content and run an online business in 2012.

Here’s why:

1. You Need Lots of Traffic. Lots.

A general rule of thumb is that you’ll need a million monthly page views before online advertising will begin to pay off. You’ll need more in highly general niches (like celebrity), and less in highly specialized ones where advertisers will pay a premium to reach certain people (like mesothelioma).

Regardless, you need a lot of traffic. And that’s not easy to get, considering you’ve got serious competition for the topics where the traffic wants to go.

As we’ll see below, you can make a lot more money from a lot less traffic with a content marketing model that sells products or services. As an entrepreneur, you want to maximize profits while minimizing expended resources, which means advertising will be an illogical choice in most cases.

I’m sure someone will tell me in the comments that they’re making plenty of money from less traffic. In response, I’d ask you to define “plenty.”

I’d rather focus on making lots of money, rather than worrying about generating lots of traffic to make less. But that’s me.

2. Advertising is Less Profitable

So, after 6 years, Copyblogger is right at the million-page-view per month point. If we had an advertising model, we would have made about 20 times less revenue last year in comparison to the model we have, which is selling software and training.

And if we added advertising now, we’d be sending people away from our own products and services. Not gonna happen.

Even among truly high traffic sites, advertising rarely stays the primary profit center. Advertising revenue can cover expenses and turn a profit if you have a ton of traffic, but what next?

Take the tech blogging world. Sites like TechCrunch and Mashable get ridiculous amounts of traffic (well, TechCrunch used to). And they both got into the conference business as fast as they could, because that’s how you boost profits – by selling seats at an event, not with more eyeballs on pages.

The dirty little secret of journalism’s focus on page views is that the value of each page view is decreasing, because the value of online advertising is decreasing. This means it’s a strategy that will likely lead to failure. Media organizations need to adopt a multi-revenue business model, or what I call a Heinz 57 model.

The thing is, you can start your company by selling products, services, or events, and make more money without needing all that traffic. Even if you hit motherlode traffic, you’ll end up needing the Heinz 57 approach — so start thinking about it now.

3. People Don’t Love Advertising

I don’t know about you, but what I love about business is making stuff people love. When people are excited about the things you create and the service you provide, it’s a bigger rush than the money.

Take Apple, for example.

People love Apple products. They stand in line to spend hundreds or thousands of dollars on Apple stuff. They wait by the front door for the new iPad to arrive.

People don’t love advertising. At best, they tolerate it, and at worse, despise it.

When you have an advertising model, you’re not selling people something they love. You’re selling them to advertisers, which puts you in an adversarial position to the audience. Plus, you’re polluting the experience of consuming the content that attracted them to you in the first place.

Google is the greatest advertising engine ever devised, because it’s the new Yellow Pages on steroids. When in search mode, people are happy to see highly relevant advertising.

People still might not love it, but at least they don’t hate it. The problem is, you’re not Google.

Why not make stuff people love?

Brian Clark is Editor-in-Chief of Entreproducer, a multimedia email publication exploring the business of independent digital media. Get more related content on Twitter.

Here’s what Entreproducer covers:

The business, revenue, staffing, and legal models that move you from content start-up to success.

Audio and video profiles of the entrepreneurs and companies that are pushing digital content innovation.

Tips, tools, and tactics for getting online content to work for you, no matter how you make money.

Comments

“When you have an advertising model, you’re not selling people something they love. You’re selling them to advertisers.”

Wow, how true that is! It’s amazing how many people have a blog and their whole idea of monitoring it is to put up Google Adwords. I tell them all the time that they’re doing themselves more harm than good, but so many still continue to think of the new media in the same terms as the old.

There is some good points, but this article is an incredibly generalization of the online advertising industry. I can understand Brian Clark’s strategy to inspire controversy (a great content marketing strategy), but I think there is a vast wealth of opportunity in online advertising. The question is: Are you doing it wrong?

So let me end by asking this, has anyone here heard of Groupon? Sounds like a dumb question, because everyone here has (unless you live in a forest with gnomes). Well this didn’t use to be the case. In fact, Groupon was considered a total failure… UNTIL they changed something.

And you want to know what they changed? It was like throwing a steak to a hound of starving dogs. They launched an aggressive affiliate marketing campaign. They had an army of affiliate marketers Advertise their company and service online, practically everywhere.

Groupon, however, is an unprofitable disaster, both as a company and for many who sign up for it. You should look closer at Groupon’s problems. An IPO does not mean you have a great company. That’s not the game Wall Street plays.

Our affiliate programs (and affiliates) are very important to Copyblogger Media. And I think promoting affiliate deals as a publisher is often more lucrative than other forms of online advertising, if you actually endorse the product because it’s good (as opposed to sticking banners on your site). Affiliate marketing can also help you decide what kind of products your audience will actually buy before developing your own. I’ll be writing about that in the near future.

That was the exact line that most jumped out at me from the piece. What a great way to put it.

People have a hostile response to advertising in most cases after years of being bombarded with it everywhere they go. Switching the model so that marketing becomes focused on adding value to the prospective customer (through informative blogs and other content marketing) rather than just loudly insisting on awareness is such an improvement on the old methods.

On the one hand, you can make a TON of money with the online ad model, but you’re right. You need lots of traffic. My entertainment site made me a lot of money, but it also generated close to 100 million hits over the course of a few years.

However, what really sucks about online advertising is this: You’re not in control. Even when you generate enough traffic to sell your own inventory, or to have specialized, boutique advertising agencies sell your inventory, you’re still at the mercy of the market and the budgets of other companies.

Would you argue then that a Content Driven marketing strategy gives you control?

I’m a firm believer in Content/Inbound Marketing it’s the only marketing I do for my main-street insurance business… But I still don’t know if I feel in control. In control of content maybe… But traffic… Still working on that.

That’s not the point of my comment. Yes, content driven marketing strategy gives you control, but I’m not debating that.

I’m talking about the difference between creating a blog that eventually sells a product or service (like consulting, coaching, software, information) or creating a blog that relies on selling advertising.

I would be in complete agreement on this point. I’ve held off on Advertising and really only push my own products and occasionally an affiliate product that I use and believe in and feel will benefit my community if they see fit.

To take this thread a step further, perhaps the entire CPM model is broken. The conversation reminds me of the music industry 15 years ago when the wheels were just starting to come off the bus. The record labels were sitting around asking “how can we sell more albums”? That, of course, was the wrong question. I listen to and buy as much music today as i ever did but the record labels are still mostly on the wrong side of the model now.

Today publishers are asking “how can we drive up CPM’s” – I think (while important) that is the wrong question. The real question is how can we build a business model that drives more revenues and value for our quality content and brand than the current CPM model does? The labels never figured this out — ITunes did it for them. Seems like someone (perhaps publishers/advertisers and perhaps someone entirely new) will create a new model. Content and brands are not going away, but the traditional CPM model (a vestige of “circulation” in the offline world) is likely not the answer no matter how much it is tweaked. We will all continue to consume and pay (one way or another) for great media — the big question is who is going to make all the money….

What about ads that are packed with value like with Jason Calacanis and thisweekin.com?

I realize that the revenue models you could come up with for content are endless, but I would rather invest all of my energy creating high quality journalistic content for the sake of high quality journalistic content and help other people sell their high quality relevant stuff.

Certainly there are ways to make the advertising model highly profitable sans google status…

I think the best opportunities in advertising and sponsorship are tied to video. Of course, that means you’re producing excellent video and attracting an audience that’s valuable to sponsors. I like the way Jason handles his sponsor messages, but I’m still not sure anyone loves it.

Also remember, you’re always selling something. Advertising sales is hard, and people who are good at it need to be paid well.

I use two types of ads in my video tutorials. The ones that interrupt at the beginning, and ones that show me using our sponsors product. My guess is most of my audience doesn’t even notice that companies pay me to create educational content that uses their product. I’ll definitely be getting rid of the interruption ads when we begin to sell our own stuff, but I think our other ad model works seamlessly with our content. That may not be the case in other niches though.

Thanks for this Brian, but isn’t the whole online content marketing model a bit of a ‘chicken and egg’ scenario?

By that I mean – don’t you at first have to write reams and reams of high quality content to build up your tribe, so in turn you have enough followers (read ‘page views’) to buy your stuff in the first place?

Even if you’re building a list to sell your products and services directly to your target audience – you first have to create that audience by at the very least skirting around the page view journalism type model (whether you like it or not).

That’s why we all still use landing and sales pages (Premise), and drive traffic/page views through our blogs (Genesis) – or am I missing the point here?

From the very start of my first site, I knew I didn’t want to put up ads. I think I tried it for about a month, but the idea of it just made me sick. Even today, if I go to a site that’s got those Google Adword boxes everywhere, I move on.

I think that turned out to be a good instinct, as I gravitated naturally to more of the model you describe above — selling classes and access to information, including live podcasts and Webinars. Also, selectively affiliate selling a few of the exact products I know my audience is likely to buy anyway works well. Staying away from the ad model has allowed me to make a decent living with a tiny fraction of that huge audience you need for ad sales to work.

Great article Brian! I especially agree with point 3– people HATE advertising! Myself included. But I will happily spend hours procrastinating at work, reading Copyblogger articles and tweeting about them because the content is useful and trustworthy.

It is so hard to get people to land on our pages and give us a couple seconds of their attention. Why would we blow all that hard work with an ad that is going to alienate them?

Given all the revenue-generation options out there today, advertising comes in (for me) at one of the smallest portions possible… and if I’m online to build a successful business that sustains a good, healthy and growing lifestyle, then I’m going to chase the biggest generators of success.

The explanation also makes perfect economic sense. The amount of interest generated for each additional viewer decreases with each additional page view. I believe that focusing on one specific segment and developing products & services to target that segment is a sure fire way of creating value.

Adam, there’s probably products/services you could provide that appeal to the broader audience of world travelers.

World travelers (no matter where they are going) are a fairly narrow segment in themselves if you consider there are 7 billion people in the world.

I’d try selling all-purpose/location travel kits or planning worksheets. You could even build a supply chain for e-commerce travel products.

Everyone needs to be able to plan their trip. Everyone needs shoes, etc. to travel in. Also, I’ve heard bad things about running hotel and flight affiliate offers, but it would certainly be worth a try.

At some point, you’ll need to find the most profitable balance of segmentation vs appeal, but I think you’re missing the point that it’s all relative anyway. There’s plenty of opportunity for broader audiences as well.

There’s going to be a really fascinating case study at the beginning where we tested different approaches to a content strategy in a PPC campaign before we invested time and energy in creating content.

We wanted to see which types of content would appeal to our ideal customer. The same could be applied to different revenue models.

we are planning a travel site for fiber arts enthusiasts (knitting, crochet, spinning, weaving). Some of the things we plan on doing to monetize are;

– City guides that suggest great places to hang out and knit, “fiber finds” which include yarn stores and fiber arts relates experiences like touring an alpaca farm or wool mill, and of course the best things to eat. These can be created as apps, interactive ebooks, or pdfs.

– Membership site with a community forum that allows people to share their best tips for traveling and their favorite things they’ve found on their journeys.

– Tours. After we’ve built an audience and established ourselves as authorities on Yarn Travel we can plan excursions that include exploring certain regions with strong roots in the fiber arts. Places like New Zealand, Norways, and Ireland are great long trips. We can also put together smaller weekend trips to major fiber arts festivals around the country. Even cruises are an option that provide special access to well known teachers in the industry.

You might want to take a look at what Chris Guillebeau has done around travel. He has an affiliate program that might be useful for you as well.

Martin said what I was going to say. Even though the content is topical, it’s really about the people you’re reaching, and how you relate to them. That’s always been the backbone of how Copyblogger has worked.

You’re right Clark, online advertising can be a source of revenue for blogs but it’s too demanding and entirely manpowered if you ask me. In my weight loss blog, I got over 120,000 targeted visitors in 2011, and generated advertising income with it, but when Google panda struck, several of my long-tail keyphrases bumped.

Advertisers switched to other viable blogs, and I went out seeking for better income sources. This wouldn’t have happened if I had a plan-B.

We should have a plan-B which can be explored and built up to become passive, hands-free and systematic. Thank you for sharing.

I think you have to consider what exactly IS your product. If your product is workshops, eBooks, or services of some kind, then your website content is your marketing (like Copyblogger).

If you are a journalist, then your product is your content – but you have to find people willing to pay for it, or a community of readers and advertisers that enjoy each other. In the online journalism world, the discussion of advertising is all about hyperlocal and community advertising, along with sharing content across different sites.

Neither of these models is really “bloggers making money”, nor are they particularly passive. But the startup costs of a blog are so low, and the competition so fierce, that the days of making money just sitting at home writing a couple of blog posts are long gone.

Display advertising is a 20th Century business model which was shoe-horned into a 21st Century technology. People put ads on pages because it was the closest analogy they could find to print, which was what they knew and which was what they had an infrastructure in place to sell for.

Chasing pageviews makes people do stupid things. Look at all the garbage on the Huffington Post.

Too many people think whoever has the most pageviews, wins. That is what needs to change.

Advertising – especially on travel sites – is a fool’s game. Ridiculously low affiliate commissions and CPMs (even if they are higher than other verticals) are bad enough… but when you consider they drive your audience elsewhere it’s even worse.

I know you’ve been hesitant to monetize Everything-Everywhere, but you’ve recently released your app, right? How is that working out?

That’s so true Brian.
I dropped my visual advertising because :
– I have a very low trafic (my blog is very young), so not a good deal to keep them ;
– advertising totally fucked up my design (to which I’m ultra-sensible) ;
– they dilutes a lot the impact of my content.
I prefer affiliate business model form now.

I’m realizing the exactly the same with Online Ad Model. My blog gets around 1 Million Page views per month. I’m forced to produce contents day in and day out. I have to depend on Organic Traffic and Adsense.

I have to start offering products and services. But, trust from readers come from great contents, till the blog reaches certain level, where people would buy the products, advertising will pay the bills.

All you need to do is some basic math. A site that is getting a premium CPM of $10 and has three ad positions per page, needs to generated 334 page views just to earn $10. If the average visitor to your site views 3 pages, you need about 100 visitors per day just to earn $10. That’s a lot of hustle to make $10.

“I don’t know about you, but what I love about business is making stuff people love.”

That’s called passion, baby! And unless your passion is advertising, focusing on it sucks. It’s amazing how many people take otherwise wonderful websites and trash them full of ads. I’m not sure if they ever wise up and take off all the senseless ads, because I never return to their site!

I keep this as simple as possible, my company Marketing Press is in the business of WordPress development and nothing else. I write content twice a week about topics that are important to market personas we developed in the interested of helping them, driving organic traffic to our site and potentially getting hired.

With that being said, we do have one onsite page with products we use for dev with affiliate links, but the revenue is very, very small and a sustainable business model.

First. Tom Foremski makes a really good point related to his Heinz 57 model: “it is tough to manage many different revenue sources”…all the more when you are a solo entrepreneur

Second Advertising model appeals to a lot of people because you have NO clients with this model! Same thing with affiliation (but you still might have to manage issues with affiliates :()
What kind of model could you choose when you don’t want to be hassled with customers? (and without having to hire someone to tackle client service)…that’s a big challenge

Great advice and it’s certainly a good reminder for anyone who’s thinking about starting a blog. However, I think there’s still some room for advertising on many sites, especially if you have a niche market, and can display highly targeted ads that don’t annoy your visitors. I hate it when ads disrupt my experience on a site, like those damn youtube ads that delay or obscure a video, but if they’re well placed and are relevant to the rest of the content on the site, I’m okay with them.

I have a well trafficked blog at http://www.PropertyUpdate.com.au and in a great space for advertising – property investment.
I’ve noticed my pay per click advertising click through rate has dropped off as I post more frequently (as Brian suggested) and my $ revenue has decreased per click.

But I agree – I make much, much more selling my own products and services and I’m now wondering whether to remove the distraction of Google Ad words all together

The timing of this article could not have been better. I recently launched a site based on ads for revenue, and I am highly disappointed. I have been collecting data on ad impressions, click through rates, etc., and the numbers are just awful. Brian isn’t kidding when he says you need A LOT of traffic.

I would also point out one more problem with ads: They slow down your page loads, which in itself has been shown to make visitors turn and leave. Between the low revenue and decreased page loads, I’m looking in to other ways to monetize the site. I think it is a case of a good idea that just needs a better business model.

Feels like an article all “I’ll just put some Adsense up and make a ton of money”-bloggers should read. Building a relationship and keeping the interest on what you do instead of funnelling people off to others clearly makes it possible to be profitable with a much smaller audience, call it 1K true fans or something else.

Best post on here yet! I would add that relying on advertisements for revenue is very scary because your whole income then revolves around the company that produces them. If it changes its business model, your income could disappear, or at least significantly deflate.

I have to say that you make pretty good arguments. I think that this ties into at I call our topical expertise. Sort of analogousness to a niche in blogging. I have been a long time proponent that the semantic web will be the next definitive milestone for the internet. Each of us having our own expertise that follows us around on the interweb seems to be the future. The internet of tomorrow will not be so much about the relevant content of a page being determined by how well is is SEO’d up or even linked to, but rather the amount of topical expertise of the writer and all those individual presences that interact and link with that piece. It would make sense with the recent announcement of google to devalue highly SEO’d pages.

Brian I have to agree. Back in 2008 I wrote something similar warning my fellow publishers from devaluing their sites advertising real estate with affiliate ads. http://www.dotmediaweb.com/blog/?p=68

The problem is a website with larger expenses still makes the same CPM or cost per click as larger sites or websites with lower expenses. For example 1 HD video equals tens of thousands of words in terms of hosting and bandwidth cost, however a blog can be hosted for as low as $5 a month but an HD video website requires several servers, intricate technology to convert the videos and lots of bandwidth available to transmit the videos. Both will earn the same amount for their equivalent content but one will see a much higher ROI.

I own several hyper-local sites where rental property owners advertise their properties and agents advertise their real estate listings. My visitors love it – that is why many of them come to the site in the first place.

That said, I’d agree that hooking your site into an ad network for text or display ads is generally a dead end.

I think the real issue is advertising being sold as a by product rather than the actual product itself. As you highlighted already, with adwords the ads form part of the solution, rather than a distraction. There are way too many sites / apps out there who have yet to monetise their services and have the belief that advertising will take care of things later down the line.

I’ve been in the online advertising business since 97 and the market is very different now to then. You can sum things up in one word. “accountability”. Gone are the days where you can sell ad inventory and expect renewals month after month. Marketeers have ever increasing range of analysis tools at their disposal.

The one point I would contest is visitor numbers somehow being linked directly to the ability to sell ad space. Its not the visitor numbers that lead to sustainable ad revenue, its the intent of your visitors. The easiest comparison would be facebook vs google. FB has the headline pageviews but the user intent is not the same. FB ads are a distraction rather than the forming part of the purpose of a visit. In other words 1 FB user is not worth the same as one google user (in ad terms). Sites like techcrunch have high page views, but the intent of those page viewer is largely not directed to make a purchase. A site with a 1,000 people looking to buy digital SLR cameras would produce a much higher ROI for its advertisers than a general tech site with hundreds of thousands of visitors. Its still very much possible to exploit the long tail theory in niches and satisfy advertisers and buyers. The key difference is those sites need to make advertising their core product and not a peripheral.

Just wondering about the earlier traffic point. A friend who is a professional photographer and earns a living from it has a Blogsite with 7500 visitors per month. They now make more from advertising than from professional photography. How do you think this is possible based on the comments you made at the beginning of this thread?